Recently, ISS and Glass Lewis released their annual benchmark policy surveys in connection with their voting policy development processes for 2025. Institutional investors, public companies, corporate directors, and other interested parties are invited to respond until the surveys close (September 5, 2024, for ISS and August 30, 2024, for Glass Lewis). The surveys often indicate items ISS and Glass Lewis are considering as updates to their voting policies in the next year.
Provided below and on the following page are summaries of the U.S. compensation-related survey topics for both ISS and Glass Lewis:
ISS U.S. Compensation-Related Topics:
| Topic |
ISS’ Survey Questions |
| Mitigating Factors for Pay-forPerformance Misalignment |
- Should ISS continue to view granting majority time-based equity awards to be a negative factor when assessing pay-for-performance misalignments, or should they revise their policy such that time-based equity with extended vesting periods would be viewed as a positive mitigating factor?
- If the current approach is revised, what length of extended vesting (e.g., 5 – 7 years) for time-based equity would be considered sufficient for ISS to view such awards as a positive mitigating factor?
- Should a meaningful post-vesting holding period be required for ISS to view such awards as a positive mitigating factor in the context of a pay-for-performance misalignment?
|
| Discretionary Annual Incentive Plans |
- Are discretionary annual incentive programs problematic, even if the program structure is consistent with industry and / or peer practice (e.g., financial services)?
|
Glass Lewis U.S. Compensation-Related Topics:
| Topic |
Glass Lewis’ Survey Questions |
| Equity Vehicle Mix |
- What mix of time-based and performance-based equity is best to align executives with shareholders?
- Do longer vesting requirements (e.g., 5+ years) provide sufficient alignment with shareholders?
- If a company issues most of its equity in time-based awards, should overall award sizes be reduced due to less risk of forfeiture?
|
| Executive Attraction and Retention |
- In what situations is the need to attract and retain executive talent a valid rationale for increases to overall pay opportunities?
- When a company provides make-whole grants, what level of detail surrounding award structure and rationale should the company demonstrate in its disclosure?
|
| Low Equity Plan Shareholder Support |
- If an equity incentive plan received significant shareholder dissent but was ultimately approved (without modification), is it appropriate for shareholders to escalate this issue to other agenda items in future years (e.g., following year Compensation Committee elections / Say on Pay)?
- What level of dissent should warrant a response from the company?
|
| Peer Group Methodology |
- If a company includes peers that have egregious pay practices, different ownership structures, and / or a material difference in size within its compensation peer group, should Glass Lewis view this as inappropriate?
- Should shareholders expect companies to seek and disclose their feedback during peer selection process and / or when considering significant increases to pay?
|
| Perquisites |
- How should perquisites be evaluated when analyzing total pay levels?
|
| Workplace Safety and Impact on Bonus |
- When overall safety performance has improved but the company records a fatality for which it may be at fault, how should annual bonus payouts be impacted?
|
| Other CompensationRelated Topics |
- Should companies disclose the median employee pay level, regardless of applicable regulatory reporting requirements?
- What factors have contributed to the executive pay gap between Europe and the U.S., and is this pay gap problematic?
|
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This report was authored by Ken Foulks, Richard Lilly, and Alex Wilhelm. To discuss this topic and any additional issues, please visit our website or call us at 212-886-1022.
